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2006 (10) TMI 227 - SC - Companies LawWhether in the nature of the respective claims arising out of the loan transaction it was just and proper to order a joint trial of the two causes? Whether there was anything in the Recovery of Debts Act which prevented the Debt Recovery Tribunal from entertaining the claim made by the plaintiff in the suit? Held that - Appeal allowed. The trial court and the High Court have failed to exercise the jurisdiction vested in them by law in refusing to transfer the suit to the Debt Recovery Tribunal Patna. They have not considered the question whether it will be fit and proper to order a joint trial of the two actions. It is not only fit and proper but also just and necessary to have the two causes tried together. Hence we allow this appeal and setting aside the order of the High Court and that of the trial Court transfer Money Suit from the file of Subordinate Judge-I Patna to the Debt Recovery Tribunal Patna for being treated as a counter-claim by way of a cross suit and for being jointly tried and disposed of pending on its file.
Issues Involved:
1. Transfer of suit from Civil Court to Debt Recovery Tribunal. 2. Jurisdiction of the Debt Recovery Tribunal. 3. Nature of claims as counter-claims or set off. 4. Joint trial of related claims. Issue-wise Detailed Analysis: 1. Transfer of Suit from Civil Court to Debt Recovery Tribunal: The appeal was filed by the bank challenging the High Court of Patna's order affirming the Subordinate Judge-I, Patna's decision to refuse the transfer of a suit to the Debt Recovery Tribunal (DRT). The bank argued that the suit filed by the company was in the nature of a counter-claim to its claim and arose out of the same cause of action as its claim before the DRT. The company had filed a suit claiming damages due to the bank's alleged failure to fulfill its obligations under a cash credit facility, while the bank sought recovery of amounts due under the same loan transaction. 2. Jurisdiction of the Debt Recovery Tribunal: The Trial Court and the High Court held that the civil court had jurisdiction to entertain the suit for damages and that it was not affected by the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The Supreme Court disagreed, stating that the question was not about the civil court's jurisdiction but whether it was just and proper to order a joint trial of the two causes. The Court held that the DRT has the jurisdiction to entertain claims of set off or counter-claims arising out of the same cause of action, as per Section 19 of the Act. 3. Nature of Claims as Counter-Claims or Set Off: The Supreme Court observed that both the bank's claim and the company's suit arose out of the same transaction or series of transactions related to the loan and cash credit facility. The Court held that the company's claim for damages could be considered as a counter-claim or set off within the meaning of Section 19 of the Act. The Court referenced the United Bank of India v. Abhijit Tea Co. (P.) Ltd. case, which interpreted counter-claims to include claims made in independent suits based on the same transaction. 4. Joint Trial of Related Claims: The Supreme Court emphasized the benefits of a joint trial, such as avoiding duplication of evidence and saving time and expenses. The Court noted that the claims of the bank and the company were inextricably interlinked, as they both arose from the same loan transaction and cash credit facility. The Court held that a joint trial would be more convenient and effective, and it was within the Court's inherent power to order such a trial. The Court concluded that the trial court and the High Court had failed to exercise their jurisdiction properly by refusing the transfer and that it was just and necessary to have the two causes tried together. Conclusion: The Supreme Court allowed the appeal, set aside the orders of the High Court and the trial court, and transferred the suit from the Subordinate Judge-I, Patna to the Debt Recovery Tribunal, Patna. The suit was to be treated as a counter-claim and jointly tried with the bank's application pending before the DRT. The parties were directed to bear their respective costs.
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